I've got a question abount CGT and bracket creep that I'd appreciate the forums thoughts on. If you are just below the top of a tax bracket does a Captial Gain add to the taxable income, i.e. push you up into the next bracket or are you just taxed on the CG at the income rate applicable if there wasn't a CG? If it does push you into the next bracket how does the 50% discount for holding over a year come into play? Thanks in advance for your thoughts...
The CGT amount (or discounted amount if held for more than a year) is simply added to your taxable income ... just as if you had received a pay rise. Say you are $5000 below the top tax bracket and you made a $40,000 capital gain on an asset held more than 12 months. Your discounted capital gain is $20,000, and this is added to your taxable income. Effectively, you would pay tax on the first $5,000 at your current rate (taking you up to the next bracket) and then tax on the remaining $15,000 at the higher rate.
